Alex Bryan: Unlike most value index funds, Schwab Fundamental US Large Company Index, weights its holdings based on fundamental measures of size, including operating cash flow, sales, and capital distribution, such as dividends and share repurchases.

This introduces a value tilt because it tends to overweight some of the companies that are trading at low multiples of these metrics and underweights companies that are trading at more expensive multiples.

However, unlike a traditional value index mutual fund, it doesn’t restrict its holdings to the value side of the style box. Rather it provides broad diversification and broad exposure to the U.S. market, and that can be an advantage relative to a traditional value index fund.

As an added benefit, it tends to increase its exposure to stocks that have become cheaper relative to their fundamentals and parse back on stocks that have become more expensive. And this can allow investors to more efficiently capture the value effect than [they can with] a traditional value index fund.

So far this approach has worked fairly well. Over the past five years, the fund landed in the top decile of the U.S. large-value category. It also outpaced the Russell 1000 Value Index by more than 2 percentage points during that time.

However, it’s not a free lunch. There are very good reasons that different stocks can trade at different valuations, such as differences in risk and growth. By ignoring differences in valuations, this particular fund tends to overweight some of the more risky names within the market, and as a result it’s been a little bit more volatile than the category average over the past five years. However, it will likely continue to reward long-term investors who can stomach a little extra volatility.